Services Performed By Banking Institutions

From the point of view of their customers these services may be

grouped under the following heads: The safekeeping of money and other

valuables; the making of payments; the making of loans; and the making

of investments. It is a common practice everywhere, and in some

countries, notably the United States, almost a universal practice for

people to intrust their money to banks for safekeeping. To a degree,

hoarding, in the sense of locking up money in private vaults and other

receptacles and keeping it under the eye and in the personal care of

the owner, is still practiced, but it is doubtless on the wane in all

civilized countries. The practice of intrusting to banks the

safekeeping of other valuables, such as important documents, jewelry,

plate, etc., is also widespread and growing.

The service of the safekeeping of money naturally leads to the second,

the making of payments. When we intrust our means of payment to a

bank, it is natural that we should also make it our treasurer and

disbursing agent, and so we do. If we have payments to make to people

at home, in other cities of our own country, or in other countries, we

usually order our bank to perform the service for us.

Loans of almost all kinds are made by banks, and certain kinds,

namely, those to business men for the everyday conduct of commerce and

industry, are made almost exclusively by them. For the most part these

are short-term loans. For long-term loans banks are also one of the

chief resorts, but in some countries these are not to so great a

degree monopolized by them as the short-term variety.

For the investment of the surplus funds of people banks are the chief

agencies. This function takes the form mainly of the sale of stocks,

bonds, and mortgages, and sometimes of the promotion of new


None of these services are performed by banks exclusively. For the

safekeeping of valuables, and sometimes of money, there are in some

places safe deposit companies to which the term "banks" is not

applied. In the making of payments the post office departments of

governments and express companies participate, and in the making of

loans and investments brokers, loan companies, lawyers, etc.,

participate. The peculiarity of banking institutions consists not in

the performance of any one of these services, but in the fact that

they specialize in them all, or in a combination of them. Merely to

keep money and valuables on deposit, or to act as paymaster, or to

make loans, or to sell bonds, stocks, and mortgages would not make an

institution a bank or an individual a banker; but to make a business

of performing most or all of these services for the public involves

the use of certain machinery and certain methods of procedure, and the

assumption of a role in the nation's economy which is distinctive and

peculiar, and which has set these institutions apart in every country

as objects of legislation and of scientific treatment, as well as in

the thought and regard of the people.

Savings Banks Some Defects In Our Investment Banking Machinery facebooktwittergoogle_plusredditpinterestlinkedinmail